India and the UAE have made significant strides in enhancing their trade relations by embracing local currencies for settlement and connecting their fast payment systems. This development follows the integration of India's Unified Payments Interface (UPI) with Singapore's PayNow just a few months ago. By signing Memorandums of Understanding (MoUs) and establishing a framework for cross-border transactions, the two countries aim to expedite international financial transactions, reduce costs, and enhance transparency. The interlinking of the UPI with the UAE's Instant Payment Platform further strengthens this collaboration.
The Local Currency Settlement System, which was initiated through an agreement between the Reserve Bank of India and the Central Bank of the United Arab Emirates, aligns with India's Digital India program's objective of expanding digital transactions. The digitization of the economy has proven beneficial in terms of efficiency and transparency, as evidenced by the substantial increase in digital transactions within India from 127 crore in 2013-14 to approximately 13,000 crore in 2022-23. It is encouraging to see India, the world's fastest-growing major economy, expanding its reach by establishing partnerships with nations like Singapore and the UAE, both of which boast considerable wealth. Singapore's annual per capita income exceeds $64,000, while the UAE follows closely with over $41,000.
Geopolitically and economically, the UAE holds significant importance as a key partner for India. The bilateral trade ties received a boost last year with the signing of the Comprehensive Economic Partnership Agreement (CEPA). During the recent Joint Committee meeting on CEPA, both countries expressed their commitment to doubling the trade in non-petroleum products to $100 billion by 2030. This digital push is expected to further facilitate remittances and investments, presenting a win-win situation for New Delhi. However, to fully leverage the potential of the UPI as a reliable payment mode, sustained efforts must be made to maximize its capabilities.
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